Options

VIX Basis

The spread between VIX futures and spot VIX — a real-time gauge of forward vol expectations and the cost of VIX-based hedges.

Definition

VIX futures rarely match spot VIX. The basis (futures − spot) is usually positive in calm regimes (contango) and inverts to negative in stress (backwardation). The shape of VIX curve drives the cost of carrying long-vol hedges via ETPs like VXX.

Contango is expensive for long-VIX positions (negative roll yield); backwardation is profitable for them.

Why it matters

VIX basis is the structural cost (or benefit) of running long-volatility strategies. It also signals the regime — calm vs stress.

Worked example

VXX has lost 99%+ of its value since launch due to persistent VIX contango. Inversion episodes (March 2020, August 2024) briefly reverse the bleed but rarely sustain.

Frequently asked

Why is VIX contango so persistent?⌄
Most of the time, expected future vol > current vol because the current realized is at recent lows. The 'variance risk premium' is built into the curve.
What's a healthy basis?⌄
M1-M2 spread of $1–2 (10–20% annualized) is normal contango. Negative spread signals stress.
Can you sell VIX basis?⌄
Yes — short VIX futures or long XIV-style strategies harvest the contango but blow up in vol spikes.
What's the relationship to SPX skew?⌄
Both reflect tail-risk pricing. Steep skew often coincides with steep VIX contango when the market is calm.

Related terms

Implied Volatility

Options

Volatility Term Structure

Options

Calendar Spread

Commodities

Tail-Risk Hedging

Geopolitics

Trade vix basis setups in real time

Cross-domain macro intelligence. Policy to prices. 7-day free trial.

Get Started

© 2026 Market Ontology. All rights reserved.